Fletcher in the News

Britain Quitting the EU Would be a Mistake: Prof. Laurent Jacque

Date: February 28, 2013

Brexit: If Britain Quits The EU, What Then?

Britain has never been too keen on getting closely involved with Europe. When Germany, France, Italy and the Benelux countries established the European Coal and Steel Community in the 1950s, the start of what became the European Union, the British turned down the offer. ...

... If Britain decides to leave, it could grab a few benefits quickly. The nation would save about £8 billion ($13 billion) a year in net budget contributions to the EU, as well as roughly £30 billion a year in EU-related red tape costs.

The British Chambers of Commerce said in its latest Burdens Barometer report available that almost a third of the country's regulatory burden came from European Union directives in 2010.

The study suggests that the cumulative costs (1998 - 2010) to UK businesses from EU-origin regulations implemented since 1998 is £60.8 billion, which accounted for 69 percent of the total net cost of dealing and complying with new laws and regulations during the 12-year period.

“Leaving the EU would be a mistake; it would hurt the UK,” warned Laurent Jacque, a professor of international finance and banking at Tufts University’s Fletcher School. A British exit would dent trade with a market that accounts for half of Britain’s exports.

While there is active debate about whether the net impact of EU membership is positive or negative, any of the benefits the UK might gain from leaving (less regulation, more competition, no contributions to the EU budget) would not start to accrue until it had actually left, which even if it happens, is still many years away.

Perhaps the main immediate economic consequence of that stance is that uncertainty around Britain’s membership could persist for nearly five years. That could potentially hinder investment into the UK if access to the European single market and the UK’s contribution to shaping the EU are seen as important attributes. It seems unlikely that there will be any extra investment flowing into the UK on prospects it may leave the EU, given that the situation is so uncertain.